To most of us buying our own home or investing in property is a huge decision that imparts a huge financial burden in a lifetime. It is also never an easy decision if you have ever been there. Thus it is common for most people to overstretch themselves when making their first or even subsequent property purchases. The latest figures from Singapore’s Department of Statistics show that 74% of household debt is purely mortgage payment. Thus we have to follow the ups and downs of the SRX price indices given the fact that home and real estate investments have a huge effect on our financial health.

  1. Role of Price Changes

The role of price changes in the property market can never be ignored. When they are high we feel more confident of our financial standing and when they fall we are filled with anxiety. The price of property at a specific time will determine our net worth and affect how much return on investment we make if we sell it at that specific point in time.

One recent example of the impact of price changes in the market is the fall in prices of luxury houses at Sentosa Cove. According to The Strait Times report, despite the fact that this is a high-end area, residence of the region are also anxious about the fall in property prices. The research stipulate that more than half of the home owners at Sentosa 9 would lose money today if they were to sell their property at computer-generated market value (X value). The report further shows that 4% of owners used in the 43 cases would lose about 40 to 50% if they were to sell their units at the X-value.

  1. Do not Overstretch in Property Investment
  • Property prices keep changing irrespective of the residential area in question and that is why it is prudent for every buyer to never overstretch when it comes to investing in property. The property market keeps changing and as home owners or property investors this change is beyond our control. Thus it is crucial to take precautionary measures that will act as a cushion against loss during the downturns irrespective of the root cause of the crises.
  • Perhaps some of the most popular examples of the economic downturns in the property market is the crises that befell the market over the last 20 years; the 1997 Asian Financial Crisis, cooling measures, the Global Financial Crisis, Sars, housing supply crunches, and low interest rates. The government has always taken some steps that help property owners not to lose during such economic times. Nonetheless, the effect is always felt no matter the remedy employed by the government.
  1. Curbing Economic Downturn in Property Investment

Tough economic times never last and there is always a turnaround in property prices irrespective of how long this takes. Some of the measures that have been employed by the government during economic downturns in the past include the cooling measures. The major aim of this regulation was to cool the private market and it included measures such as the eradication of the interest

Regardless of property types, HDB, resale condo or new launch condo, the best way to prevent anxiety during the tough times is to purchase property that will be kept on hold for at least 5 years. The property value may be down during an economic downturn but as long as the economy keeps growing, the value of your property will definitely get back on track.

  1. Avoid Seller’ Agent Trap when Buying

There are so many mistakes that buyers of property make from time to time but this is perhaps is one of those mistakes that lead one to over-extend in their portfolio of property investments. Always remember that the seller’s agent is there to make a sell, period. No matter how a deal may be good for you, the purpose of the transaction is to make a sell and thus you do not have to trust every word you hear from the agents.

If one is not cautious in their hunt for property, they may end up committing themselves to a number of deals that do not favor them. Most of the agents tell you want you want to hear and thus it is very common for them to withhold negative information. Fortunately, you do not have to fall into these traps if you understand what you are doing. Take your time researching about your targeted property and its surroundings. Use the various platforms available online to find out any proposed projects or developments within an area. You should also check past resales and new sales when verifying the asking price of a piece of property.

 Buying under construction aka new launch condo

All government land sales and land bid price are available on URA website. Therefore, the selling price by developers will depend on their winning bid and Singapore is very transparent with such information.  Here, I have also summarized the following land cost for Clement Canopy, Grandeur Park Residences and Seaside Residences that are launching in 1st Quarter of 2017. These three major launches will total up to 2000 units in 1st Quarter of 2017. Do your own due diligence and research to determine if any new launch condo project is a good deal in 2017.

 

Clement Canopy Grandeur Park Residences Seaside Residences
$615 per sq ft per plot ratio (psf/pr) $761 per sq ft per plot ratio (psf/pr) $858 per sq ft per plot ratio (psf/pr)

Points to Remember

To avoid adverse losses that may result from economic downturns in the future, follow these key points;

  • Conduct house inspection before purchase-this may be costly in the short term but it will pay off in the long run. It will reinforce the salability of your property.
  • Consider additional costs and running cost when buying your property-buying a unit of property does not mark the end of the road. There are always some extra costs that cannot be avoided. For instance, property tax, maintenance expenses, repairs and replacements, and many others.
  • Consider the future value of your property-it is sagacious to consider the future value of property even if you may not plan to resale it in the future. This is an important precautionary measure against loss of investment since preferences change over time. Families may enlarge and in such cases bigger units are required. Choose properties that lie in close proximity to MRTS, schools, and offices.
  • Do your homework-do not rely on what everyone is saying since free advice is available everywhere. Do your own research, and most importantly at the end of it make your own decision.

External factors such as global financial crises are beyond the control of any property investor but it is within the power of every investor to take charge of their personal property investments. It is always so much distressing for an investor to find themselves in a position where they are forced to sell property at a loss. If you do not overstretch when investing in property then you are less likely to suffer from an economic downturn.